Correlation Between National Bank and HomeTrust Bancshares

Can any of the company-specific risk be diversified away by investing in both National Bank and HomeTrust Bancshares at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining National Bank and HomeTrust Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Bank Holdings and HomeTrust Bancshares, you can compare the effects of market volatilities on National Bank and HomeTrust Bancshares and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in National Bank with a short position of HomeTrust Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and HomeTrust Bancshares.

Diversification Opportunities for National Bank and HomeTrust Bancshares

0.73

Correlation Coefficient

National Bank  HomeTrust Bancshares

Poor diversification

The 3 months correlation between National and HomeTrust is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust Bancshares and National Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on National Bank Holdings are associated (or correlated) with HomeTrust Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeTrust Bancshares has no effect on the direction of National Bank i.e., National Bank and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between National Bank and HomeTrust Bancshares

Given the investment horizon of 90 days National Bank Holdings is expected to generate 1.07 times more return on investment than HomeTrust Bancshares. However, National Bank is 1.07 times more volatile than HomeTrust Bancshares. It trades about 0.07 of its potential returns per unit of risk. HomeTrust Bancshares is currently generating about 0.04 per unit of risk. If you would invest  4,334  in National Bank Holdings on September 3, 2024 and sell it today you would earn a total of  440.00  from holding National Bank Holdings or generate 10.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

National Bank Holdings  vs.  HomeTrust Bancshares

National Bank Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HomeTrust Bancshares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HomeTrust Bancshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, HomeTrust Bancshares is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with National Bank and HomeTrust Bancshares

The main advantage of trading using opposite National Bank and HomeTrust Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, HomeTrust Bancshares can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HomeTrust Bancshares will offset losses from the drop in HomeTrust Bancshares' long position.

The idea behind National Bank Holdings and HomeTrust Bancshares pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.